NZ Level 6 (NZC) Level 1 (NCEA)

Comparing Loans

The table presents the details of three types of home loans.

Loan | Interest Rate (p.a.) | Legal Fees | Application Fee | Service Fee (p.a.) |
---|---|---|---|---|

A: Fixed for 5 years, then variable | $5.99%$5.99% | $\$160$$160 | $\$550$$550 | $\$20$$20 |

B: Variable | $5.74%$5.74% | $\$100$$100 | $\$375$$375 | $\$25$$25 |

C: Fixed | $6.03%$6.03% | $\$160$$160 | $\$775$$775 | $\$15$$15 |

a

Which loan option currently has the lowest annual interest rate?

A

A

B

B

C

C

A

A

B

B

C

C

b

Calculate the total fees that loan A will incur in the first year.

c

If Loan C is taken out on a $30$30 year term, calculate the total fees incurred over the term of the loan.

d

The table shows the expected change in the variable rate for the next 4 years.

Year | Rate change |
---|---|

1 | +$0.3%$0.3% |

2 | -$0.18%$0.18% |

3 | -$0.04%$0.04% |

4 | +$0.32%$0.32% |

In 4 years, by what percentage will the variable rate of Loan B exceed the fixed rate of Loan C?

e

Home loan rates are expected to fluctuate significantly for the next decade, and as the rate changes, loan repayments change accordingly. If Maria wants to know her exact repayments over the 7 year term of her loan, which should she choose?

A

A

B

B

C

C

A

A

B

B

C

C

Easy

Approx 7 minutes

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